Elon Musk, Tesla’s crestfallen chairman and CEO, is arguably a controversial leader. He is often heralded as the type of prolific entrepreneur and visionary for whom space and the internal combustion engine were not complex obstacles, but rather the logical next frontier for his companies, SpaceX and Tesla. However, more recently he has since become the very emblem of erratic corporate leadership, marking the limits of imagination, personal restraint and hyper-productivity. Some would even go as far as to say he is suffering from an Icarus complex, with one wax wing his Twitter account and the other his hubris.
Musk’s recent failures:
The most recent news regarding Elon Musk is that of his war with The Securities and Exchange Commission (SEC). The cause of this battle of the titans began with Musk’s Twitter post on August 7th 2018, in which mentioned that he could privatize Tesla at a price of $420 per share, and that the related transaction funds have been secured. The only uncertainty left was the shareholder vote. However, the price of $420 per share represented quite a high premium in comparison to the transaction price at the time.
And when Musk announced this amazing news, Tesla’s share price soared more than 6%. But as a long term CEO, it is assumed that Musk knew that privatization deals are uncertain and can be affected by many unexpected events. Musk hadn’t yet discussed specific trading terms, including prices, with any potential financing partner. His statement of possible transactions actually lacked a sufficient factual basis. Therefore, the Securities and Exchange Commission’s initial allegation stated that Musk issued a “false and misleading” statement and failed to inform the regulator of the company’s major events in a timely manner.
And two days after the Securities and Exchange Commission sued Elon Musk for securities fraud related to the misleading tweets about Tesla, Musk and Tesla reached an agreement with the SEC. The settlement allows Musk to stay on as CEO, but requires him to relinquish his role as chairman of the board, and bans him from allowing to seek that post again for three years. In addition, Musk is required to pay $20 million in fines and agree to comply with corporate communication processes. Tesla has also agreed to pay $20 million in fines and to appoint two new outside members to the board. Musk and Tesla agreed to the terms without admitting or denying wrongdoing. The settlement still must be approved by the federal court in Manhattan where it was filed.
Tesla’s stock cratered during Friday trading, dropping almost 14 percent after news of the lawsuit broke after hours on Thursday. That impact almost certainly pressured Musk and Tesla to pursue the settlement quickly. It also underscored Wall Street’s confusion over the news that Musk rejected a prior settlement offer, which had been the impetus for the SEC to file suit. According to reports, the SEC’s earlier settlement offer had also required Musk to give up the chairman’s seat, albeit for only two years instead of three.
However, the outcome will probably save Tesla—in the short term, at least. But it speaks volumes about its CEO’s station, and how much it has fallen. After the SEC lawsuit was filed, contributing editor of The Atlantic, Ian Bogost opined that Elon Musk is his own worst enemy. But not just because of the recent ill-advised tweets about a hypothetical leveraged buyout of Tesla. Bogost speculated that Musk’s troubles at Tesla started because his previous business successes, though substantial in financial terms, hadn’t brought him experience running and managing a public company, let alone one that had to design, manufacture, and distribute consumer goods at scale. Many claim that Musk couldn’t control labor and production issues at his factories, sometimes casting his own management failures as treason on the part of his workers. Then he lashed out at the short sellers who took that news, partly accessible because Tesla had to make public filings, as a reason to bet against the company.
Musk’s war on the media, carried out in public in sometimes embarrassing ways, only produced more problems. According to Oppenheimer analyst Colin Rusch, Musk’s ousting might not be such a bad thing. He reiterated his performance rating and $385 stock-price target, which is 25% above Thursday’s closing price of $307.52. “We continue to believe that [Tesla] would benefit from a stricter management structure and active board engagement,” Rusch wrote in a note to clients. Regarding concerns over how much cash the company might need, he said strong deliveries and production numbers due out next week “could help support shares” while the legal worries cap movement.
Are you making the same mistakes?
There are several important takeaways from Musk’s challenges throughout his tenure as CEO. As the leader of a company your public image can both be your rise to success and the reason it can all come crashing down unexpectedly. But you don’t need a publicly held multimillion dollar company to consider the importance of your public image. How your own management and employees perceive you can be equally as important and made public to any potential customers with either a positive or negative effect. If they believe that you are trustworthy, knowledgeable and experienced they are more likely to follow your directions, take initiative on their own and recommend your company to everyone they know. It’s no longer just about making the choices that you believe in but the ones that ensure the confidence of your employees.
Are you ensure that you have the right experience to confidently be making those choices about the financial future of your company? If so it may be time to lean on someone who has the expertise. You don’t need to have all the answers but you do need to know when it’s time to ask the people who do.
Bogost, I. (2018) Elon Musk’s Fait Accompli. Assessed at: https://www.theatlantic.com/technology/archive/2018/09/elon-musk-and-tesla-reach-settlement-sec/571738/
CNBC (2018) SEC charges Tesla CEO Elon Musk with fraud. Assessed at: https://www.cnbc.com/2018/09/27/tesla-falls-4percent-on-report-elon-musk-sued-by-sec.html
Disparte, D. (2018) Elon Musk Versus The SEC: When A Tweet Costs $40 Million. Assessed at: https://www.forbes.com/sites/dantedisparte/2018/09/29/elon-musk-versus-the-sec-when-a-tweet-costs-40-million/#17dbdfd71556
Heater, B. (2018) Here is the SEC complaint against Elon Musk and Tesla. Assessed at: https://techcrunch.com/2018/09/27/here-is-the-sec-complaint-against-elon-musk-and-tesla/?guccounter=1
Marketwatch (2018) The SEC vs. Elon Musk: What the lawsuit means right now for Tesla investors. Assessed at: https://www.marketwatch.com/story/the-sec-vs-elon-musk-what-the-lawsuit-means-right-now-for-tesla-investors-2018-09-28
SEC (2018) Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge. Assessed at: https://www.sec.gov/news/press-release/2018-226